Notice2022-14999
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 5.22 To Remove Certain References to the Market-Wide Circuit Breaker Program
Primary source
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Published
July 14, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 134 (Thursday, July 14, 2022)</title>
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[Federal Register Volume 87, Number 134 (Thursday, July 14, 2022)]
[Notices]
[Pages 42237-42239]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-14999]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95228; File No. SR-CBOE-2022-035]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rule 5.22 To Remove Certain References to the Market-Wide Circuit
Breaker Program
July 8, 2022.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on June 30, 2022, Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe
Options'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the Exchange. The Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') is
filing with the Securities and Exchange Commission (the ``Commission'')
a proposal to amend Rule 5.22 to remove certain references to the
Market-Wide Circuit Breaker program. The text of the proposed rule
change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (<a href="http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx">http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx</a>), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Exchange Rule 5.22 to remove certain
rule text that references the Market-Wide Circuit Breaker (``MWCB'')
program for equity securities. The proposed changes are intended to
clarify the Exchange's rules regarding trading halts in options due to
a MWCB. In addition, the Exchange proposes to make certain non-
substantive changes to Rule 5.22 to delete references to individual
stocks, which no longer trade on the Exchange.
MWCB Program
On March 16, 2022, the Commission approved a proposal by the New
York Stock Exchange LLC (``NYSE'') to make permanent the MWCB
program.\5\ The Commission approved a proposal filed by the Exchange on
April 12, 2022, to adopt on a permanent basis the MWCB pilot
program.\6\ The Exchange's affiliated equities exchanges similarly
received approval to make permanent the MWCB pilot program on April 12,
2022.\7\
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\5\ See Securities Exchange Act Release No. 94441 (March 16,
2022), 87 FR 16286 (March 22, 2022) (SR-NYSE-2021-40) (Order
Granting Accelerated Approval of a Proposed Rule Change, as Modified
by Amendment No. 1 To Adopt on a Permanent Basis the Pilot Program
for Market-Wide Circuit Breakers in Rule 7.12).
\6\ See Securities Exchange Act Release No. 94706 (April 12,
2022), 87 FR 22954 (April 18, 2022) (SR-CBOE-2022-018) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change to
Adopt on a Permanent Basis the Pilot Program for Market-Wide Circuit
Breakers, Currently Codified in Rule 5.22).
\7\ See Securities Exchange Act Release No. 94705 (April 12,
2022), 87 FR 22977 (April 18, 2022) (SR-CboeBYX-2022-011) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To
Adopt on a Permanent Basis the Pilot Program for Market-Wide Circuit
Breakers, Currently Codified in Rule 11.18); Securities Exchange Act
Release No. 94702 (April 12, 2022), 87 FR 23003 (April 18, 2022)
(SR-CboeBZX-2022-027) (Notice of Filing and Immediate Effectiveness
of a Proposed Rule Change To Adopt on a Permanent Basis the Pilot
Program for Market-Wide Circuit Breakers, Currently Codified in Rule
11.18); Securities Exchange Act Release No. 94701 (April 12, 2022),
87 FR 22963 (April 18, 2022) (SR-CboeEDGA-2022-008) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To
Adopt on a Permanent Basis the Pilot Program for Market-Wide Circuit
Breakers, Currently Codified in Rule 11.16); Securities Exchange Act
Release No. 94699 (April 12, 2022), 87 FR 22967 (April 18, 2022)
(SR-CboeEDGX-2022-023) (Notice of Filing and Immediate Effectiveness
of a Proposed Rule Change To Adopt on a Permanent Basis the Pilot
Program for Market-Wide Circuit Breakers, Currently Codified in Rule
11.16).
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The Exchange's current rule regarding MWCB halts can be found in
Rule 5.22,\8\ which states, ``[t]he Exchange shall halt trading in all
stocks and stock options whenever a market-wide trading halt known as a
circuit breaker is initiated in response to extraordinary market
conditions.'' Rules 5.22(a) \9\ and 5.22(b) \10\ describe the
applicable Market
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Declines and associated trading halts applicable to MWCB. The Exchange
notes that the text in Rules 5.22(a) and 5.22(b) is identical to the
MWCB language found in the Exchange's affiliated equity exchanges'
rules.\11\ Those rules are implemented exclusively by equities
exchanges. While the Exchange previously operated a stock trading
facility, this functionality is no longer supported by the Exchange and
as such, the Exchange is proposing to remove the MWCB rules associated
with equity securities. Rules 5.22(f)-(h) detail the MWCB testing
requirements that were implemented as part of the adoption of the MWCB
program on a permanent basis.\12\ The Exchange is now proposing to
remove the language in current Rules 5.22(a), 5.22(b), 5.22(d),
5.22(e), 5.22(f), 5.22(g), and 5.22(h), as this language applies
specifically to equity securities, which do not trade on the Exchange.
Given that the introductory language in Rule 5.22 specifically states
that stock options will be halted in the event of a market-wide circuit
breaker,\13\ the MWCB rules applicable to equity securities (currently
housed in Rules 5.22(a)-(b), (d)-(h)) are not necessary. The Exchange
believes that by removing this language its rules regarding stock
option halts due to market-wide circuit breakers will provide clarity
for Trading Permit Holders \14\ and others who may rely on the rule.
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\8\ See Exchange Rule 5.22 (``Market-wide Trading Halts due to
Extraordinary Market Volatility'').
\9\ See Exchange Rule 5.22(a) (``Definitions''). A Market
Decline means a decline in price of the S&P 500 Index between 9:30
a.m. and 4:00 p.m. on a trading day as compared to the closing price
of the S&P 500 Index for the immediately preceding trading day. A
Level 1 Market Decline means a Market Decline of 7%, a Level 2
Market Decline means a Market Decline of 13%, and a Level 3 Market
Decline means a Market Decline of 20%.
\10\ See Exchange Rule 5.22(b) (``Halts in Trading''). The
Exchange shall halt trading in all stock or stock options for 15
minutes if a Level 1 or Level 2 Market Decline occurs after 9:30
a.m. and before 3:26 p.m. (or 12:26 p.m. in the case of an early
scheduled close). The Exchange will not halt trading if a Level 1 or
Level 2 Market Decline occurs at 3:26 p.m. (12:26 p.m. on days with
an early scheduled close) or later. The Exchange shall halt trading
in all stocks and stock options until the next trading day if a
Level 3 Market Decline occurs at any time during the trading day.
\11\ See Cboe BYX Exchange Rules 11.18(a)(1)-(4) and 11.18(b);
Cboe BZX Exchange Rules 11.18(a)(1)-(4) and 11.18(b); Cboe EDGA
Exchange Rules 11.16(a)(1)-(4) and 11.16(b); Cboe EDGX Exchange
Rules 11.16(a)(1)-(4) and 11.16(b).
\12\ See Exchange Rule 5.22(f) (``Market-Wide Circuit Breaker
Testing'').
\13\ Supra note 8.
\14\ A Trading Permit Holder means ``any individual,
corporation, partnership, limited liability company or other entity
authorized by the Rules that holds a Trading Permit.'' See Eleventh
Amended and Restated Bylaws of Cboe Exchange, Inc. Section 1.1
(``Definitions''). A Trading Permit ``means a license issued by the
Exchange that grants the holder or the holder's nominee the right to
access one or more facilities of the Exchange for the purpose of
effecting transactions in securities traded on the Exchange without
the services of another person acting as broker, and otherwise to
access the facilities of the Exchange for purposes of trading or
reporting transactions or transmitting orders or quotations in
securities traded on the Exchange, or to engage in other activities
that, under the Rules, may only be engaged in by Trading Permit
Holders, provided that the holder or the holder's nominee, as
applicable, satisfies any applicable qualification requirements to
exercise those rights.'' See Exchange Rule 1.1 (``Definitions'').
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As a result of the proposed changes described above, the remaining
provisions of Rule 5.22 have been renumbered. In addition, the Exchange
has proposed a non-substantive change to current Rule 5.22(c) in order
to remove outdated reopening procedures and reference current Rule
5.31, which describes the reopening process for all halts.\15\ The
Exchange notes that these changes are non-substantive and are being
proposed to better organize the Exchange's rules regarding halts due to
MWCB and provide a more accurate description of the Exchange's
reopening process following a MWCB halt.
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\15\ See Rule 5.31(g) (``Opening Auction Process Following
Trading Halts'').
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\16\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \17\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \18\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
\18\ Id.
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In particular, the Exchange believes that removing the text in
current Rules 5.22(a)-(b), (d)-(h) will promote just and equitable
principles of trade, remove impediments to and perfect the mechanism of
a free and open market and a national market system, and protect
investors and the public interest because the text being removed
applies to equity securities, which do not currently trade on the
Exchange. The language in Rules 5.22(a)-(b), (d)-(h) describes the
applicable Market Declines, trading halts, reopening processes, and
MWCB testing requirements that are identical to the corresponding MWCB
rules in the Exchange's affiliated equities exchanges. Those rules are
implemented exclusively by equities exchanges. As the Exchange does not
trade equity securities, the Exchange believes it is confusing to have
rule text that describes the MWCB program within its rules and believes
that limiting the text in Rule 5.22 to describe that stock options will
be halted in the event of a MWCB will eliminate potential confusion
amongst Trading Permit Holders. The Exchange notes that competing
exchanges have similar rule text regarding trading halts in options
when a MWCB commences in equity securities.\19\ In addition, the
Exchange believes that the proposed non-substantive change to remove
the current, outdated rule text in Rule 5.22 regarding the reopening
procedures for halts due to a MWCB promotes just and equitable
principles of trade, removes impediments to and perfects the mechanism
of a free and open market and a national market system, and protects
investors and the public interest because it seeks to clarify that any
reopening due to a MWCB halt will be conducted under the provisions of
Rule 5.31. By providing a reference to Rule 5.31, the Exchange believes
Trading Permit Holders will be directed to the most relevant reopening
procedures and any potential confusion regarding the reopening process
for halts due to MWCBs will be eliminated.
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\19\ See NYSE Arca Options Rule 6.65-O(e), which states ``[t]he
Exchange shall halt trading in all options whenever the equities
markets initiate a market-wide trading halt commonly known as a
circuit breaker in response to extraordinary market conditions.''
See also MIAX Options Exchange Rule 504.03, which states ``[t]he
Exchange shall halt trading in all securities whenever a market-wide
trading halt commonly known as a circuit breaker is initiated on the
New York Stock Exchange in response to extraordinary market
conditions.''
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Similarly, the Exchange believes that removing language that
references the trading of stocks on the Exchange will promote just and
equitable principles of trade, remove impediments to and perfect the
mechanism of a free and open market and a national market system, and
protect investors and the public interest as it is inapplicable to the
Exchange. Equity securities are not eligible for trading on the
Exchange and the rules are applicable only to the securities which
currently trade on the Exchange. Therefore, deletion of this language
will eliminate any potential confusion from the Rules.
For the foregoing reasons, the Exchange believes that the proposed
change is consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not
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necessary or appropriate in furtherance of the purposes of the Act. The
proposed change is not intended to address competition, but rather,
makes clarifying changes to Rule 5.22 in order to benefit all Trading
Permit Holders equally. The Exchange does not believe that removing the
MWCB rule text that is applicable to equity securities would have any
impact on competition as the revised rule text will look substantively
similar to the rules of other competing options exchanges. The Exchange
seeks to ensure consistency amongst exchanges with respect to this
industry-wide program without implicating any competitive issues.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \20\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\21\
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\20\ 15 U.S.C. 78s(b)(3)(A)(iii).
\21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \22\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\23\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange asked
that the Commission waive the 30 day operative delay so that the
proposal may become operative immediately upon filing. The proposed
rule change simply removes rule text that does not apply to stock
options exchanges and would clarify the MWCB halt process. Therefore,
the Commission hereby waives the 30-day operative delay and designates
the proposed rule change as operative upon filing.\24\
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\22\ 17 CFR 240.19b-4(f)(6).
\23\ 17 CFR 240.19b-4(f)(6)(iii).
\24\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \25\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\25\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#cfbdbaa3aae2aca0a2a2aaa1bbbc8fbcaaace1a8a0b9"><span class="__cf_email__" data-cfemail="552720393078363a3838303b2126152630367b323a23">[email protected]</span></a>. Please include
File Number SR-CBOE-2022-035 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2022-035. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions.
You should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-CBOE-2022-035
and should be submitted on or before August 4, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-14999 Filed 7-13-22; 8:45 am]
BILLING CODE 8011-01-P
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